Sometimes, the most profitable trades are actually those that are the easiest to identify. KISS traders believe that the simplest solutions are the best ones, and they follow the generic principle of “keep it simple, stupid!” in their trades (this is also the supposed origin of the name of this approach to investing, too).

Of course, successful KISS traders don’t abandon all technical analyses and indicators, but they do tend to abide by Occam’s Razor: “the simplest explanation is the best one.”

Applying the principle

The KISS principle can be applied to all aspects of trading (and life in general), and it tends to be positively correlated with experience. Thus, the more that an investor knows about a particular stock or area, the easier it will be for him or her to find the simplest solution to an investment problem.

KISS traders believe that complex trading strategies and modes of analysis can be counterproductive to the bottom line: profit.

An example of a simple trade

Say a stock experienced a breakout to the upside, followed by a reversal bounce. The KISS trader might deduce a low risk entry point for the stock based on this history. By following that stock’s hourly price levels, the investor can predict when it will rise and fall.

KISS traders trade on belief, and they are trading against other investors whose beliefs disagree with them. Thus, a KISS trader is correct in his or her beliefs only on the condition that their investments are making money. They tend not to hold onto investments that are not profitable. They respond to activity in the market; if a stock’s price is going up, they tend to go along with that and to continue with it until it stops.

Conclusion

Sometimes highly sophisticated techniques are worthwhile to investors, and other times they complicate things without actually yielding better results. KISS traders may receive some flak from those investors who believe in rigorous analysis at all times, but the most successful KISS proponents make a profit without worrying about those details. Instead, they find the simplest, most common-sense trades, and make money there.